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OnDeck Review: Alternative Lending for Small Business

 

If you’re a small to medium sized business and you need money but can’t qualify for a traditional bank loan, or if you need money fast – then OnDeck might be what you are looking for.  OnDeck is offering an alternative to the traditional banking process that ignores a large portion of America’s small business.  OnDeck offers small-business loans of up to $500,000 and lines of credit of up to $100,000.

OnDeck has funded billions in loans to businesses in over 700 industries since opening its doors in 2007.  The lender works within all different industries, from restaurants to beauty salons to various health care institutions.  It doesn’t really matter, if you are a small business and you’ve met their credentials, they can help.

OnDeck can provide convienience and speed that you can’t find at a traditional bank, with lower qualifications as well.  The catch is, you will most likely pay a higher annual percentage rate (APR) on the debt.  The APR basically represents the true annual borrowing cost of the loan with all fees and interest included.

I mentioned lower qualifications above, and I’d like to elaborate on that now.  What I meant was that in comparison to a traditional bank loan, it is much easier for businesses to get funded through OnDecks financial assessment process because they look at different factors.  They have their own risk analysis that is much more lenient than traditional banks.  Alternative lenders like OnDeck only require 6 months’ bank statements where as banks require years of all financial statements.  Your business and personal credit is held in high regard with banks but alternative lenders won’t turn you away because of your credit.  Banks also require you to have been in business for longer than an alternative lender will.  So for companies that are new on the scene, don’t have great credit, and need a loan under $250,000 – seek alternative lending!

Now, to elaborate on what exactly you’ll need if you want to get a loan from OnDeck..

On Deck’s Minimum Qualifications:

  • Been in business at least 12 months.
  • Bad personal credit is not a problem with OnDeck, they can still help you out. At least one owner has a personal credit score of at least 500 for term loans and a majority owner with a credit score of at least 600 for lines of credit.
  • You’ve have no personal bankruptcies in the last two years.
  • Your business has to of had a revenue of at least $100,000 or more in the last year for term loans and at least $200,000 for lines of credit.
  • You’re not on the restricted industries list.
  • You’re able to provide a business tax ID, three months of credit card statements, on to three months’ bank statements, a social security number and driver’s license number.
  • OnDeck takes a blanket lien on all the business assets on its term loans, which gives the company the right to sell said assets in order to repay the loan should your business fail.

Reasons You Should Use OnDeck:

OnDeck is first and foremost much faster and easier than traditional banks.  You can completely their application online or by phone in as little as ten minutes.  You only need basic information to apply as well, including your business tax ID, bank statements, credit card statements and your social security and driver’s license number.  You will be given a decision within minutes.  If you are approved, you could receive your funding within as little as 24 hours.  This is good if you are a small-business owner who wants to capitalize on a business opportunity that is time sensitive or needs to pay off an unexpected expense and can’t afford to wait months for a traditional bank loan.

OnDeck also has looser qualifications, as mentioned above.  Traditional banks usually require personal assets as collateral; OnDeck does not.  Banks tend to look for a very strong personal credit score.  Say 720 or higher.  OnDeck’s minimum for term loans is a score of 500.  Banks typically want you to have been in business at least two years; OnDeck requires only one year.

Loyalty pays off when working with OnDeck.  For example, OnDeck’s loans require a one-time origination fee of 2.5% of your total loan amount.  However, this figure drops to 1.25% on your second loan and 0% to 1.25% on the remaining loans you take out thereafter.  Loyal customers in good standing typically get a reduced interest rate on their loans as well after several years with OnDeck.

OnDeck, much like other alternative lending companies, prefer daily or weekly payments for term loans.  For a line of credit, repayments are made weekly through ACH withdrawals.  Lower-risk businesses are more likely to receive a weekly option on term loans.  Since the payments are automatic, you don’t have to worry about ever incurring any late fee, but you do need to ensure you have enough money in your account.  OnDeck likes to work with businesses that prefer daily or weekly repayments because the cash flow is much steadier.  It makes it easier than paying a hefty one-time payment every month when you are working on growing your business.

It also helps that OnDeck reports your payment activity to the business credit bureaus.  Making your payments on time will raise your business credit score and in turn help you get larger and cheaper small-business loan in the future.

The Downside:

OnDeck’s term loans have APRs from 9% to 98% and rates for its lines of credit range from 14% to 36%.  This usually includes origination fees on its term loans and a $20 monthly maintenance fee for the lines of credit.  While OnDeck’s small-business loan rates have been steadily decreasing over the last few years, the APR is still way higher than that of a traditional bank loan.

Also, OnDeck requires a lien and personal guarantee in order to make sure they get paid back.  Although their term loans are not back by any specific collateral, OnDeck takes a blanket lien on all of the business assets.  OnDeck also requires borrowers to sign a personal guarantee.  A personal guarantee is a written agreement that says the lender can go after a borrower’s personal assets in the event of a nonpayment.  Failure to repay the loan can also damage your personal credit score.

OnDeck is also just one company, relatively speaking, with all the small-businesses in America that need funding, OnDeck still needs to decline a large amount of their applications.  Also, unfortunately, if you apply for a loan and get denied by OnDeck, that will negatively affect your credit score.  That is why marketplace companies like Sprout exist.

What is a Marketplace?

A marketplace is a sort of intermediary where specialists very much like brokers will take a look at your financial situation and determine which direct lenders are more likely to approve you.  They can help you determine which products are best for your specific type of business and need, and they will help you structure your payout structure and length of term.  Marketplaces such as www.SproutLending.com allow you to fill out one easy application and then get responses from all direct lenders rather than just one.  That way, we can choose the best deal for you while helping you avoid any application denials or hits to your credit.

There are a lot of reasons to go with OnDeck over traditional banks.  OnDeck helps thousands of small-businesses per year receiving funding to help grow their companies.  The problem is, they can’t help everyone, and being denied for a loan doesn’t look good on your credit score.  That’s why it’s good to be aware, and to know that you have more options than just applying for a loan individually at each direct lender you come across.  A marketplace is a great place for small-businesses seeking lending for the first time as well as business owners who have been through the process before and know exactly what they want.

Working With Sprout

Sprout is an online marketplace where businesses come to compare and save on small business loans. You go to www.SproutLending.com and simply fill out a profile or call us at 800-865-6057. Based on that information you provided, Sprout suggests the best matches depending on the amount and purpose of the business loan you are seeking. Last year, Sprout and it’s staff was responsible for over $100 million in loan approvals.

To speak with a funding specialist now, call:

800-865-6057

 

 

 

 

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